State Bank of India - Technofunda | Globe Capital
03-Aug-2021
State Bank of India – Technofunda

At the CMP of Rs 446, the stock is trading P/BV multiple of 1.5x which looks reasonable valuation.

Overview and Recommendation

Brief:

At the CMP of Rs 446, the stock is trading P/BV multiple of 1.5x which looks reasonable valuation.

Profile:

State Bank of India (SBI) a Fortune 500 company, is an Indian Multinational, Public Sector Banking and Financial services statutory body headquartered in Mumbai. The rich heritage and legacy of over 200 years, accredits SBI as the most trusted Bank by Indians through generations. SBI, the largest Indian Bank with 1/4th market share, serves over 44 crore customers through its vast network of over 22,000 branches, 58,500 ATMs, 66,000 BC outlets.

Key Triggers:

Strong Q4FY21 Earning performance – SBI Q4 net profit jumps 80% YoY to Rs 6,451 crore on lower provisioning as compare to previous year’s profit of Rs 3,580.8 crore. On a quarterly basis, the bottom line expanded 24.14%. During the quarter its provisions and contingency fund dropped 18.11 per cent year- on-year (YoY) to Rs 11,051 crore, of which provision for NPA was Rs 9,914.23 crore, from Rs 13,495 crore set aside in Q4FY20.

Net interest income (NII) – the lender’s main source of income increased to Rs 27,067 crore during the quarter. SBI’s NII in Q4FY20 was Rs 22,766.9 crore, and Rs 28,819.9 crore in Q3FY21

Domestic NIM for FY21 was at 3.26%, up 7 bps YoY. Net NPA, on the other hand, stood at Rs 36,809.72 crore, up from Rs 29,031.72 crore in Q3FY21. The same declined from Rs 51,871 crore reported in Q4FY20. NNPA for the quarter came in at 1.5%, up from 1.23% QoQ.

Expected Value unlocking from Subsidiaries – It has several

unlisted subsidiaries like SBI Asset Management Company, SBI Asset Management company, SBI General Insurance & SBI Merchant Banking etc

Valuation & View:

At the CMP of Rs 446, the stock is trading P/BV multiple of 1.5x which looks reasonable valuation.

Key Risk

Increased provisioning & NPAs may reduce profitability

Technical View:

SBIN is one of the biggest PSU bank in India. It is trading in Higher – Highs and Higher – Lows formation above its long term as well as short term moving averages on daily charts. It has been trading in a congestion zone (400-442 levels) for past one month. On Aug 3, 2021, It has witnessed bullish breakout from the above mentioned congestion zone.

Going ahead, we expect it to continue its northward journey. Hence, we suggest to go lsong in SBIN as we expect it test 530 levels in near term.

Summary

Considering both the factors fundamental & technical parameter, we recommend a ‘BUY’ in SBIN at current level for the target price of Rs. 530 with close below stop loss of Rs. 408.

Disclosure

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